Fitch Ratings has affirmed United Bank for Africa (UBA) Plc’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook.
It has also affirmed the bank’s National Long-Term Rating at ‘A+’ and assigned a Stable Outlook.
According to Fitch, UBA Issuer Default Ratings (IDRs) are driven by its standalone creditworthiness, as expressed by its ‘b-‘ Viability Rating (VR). The VR is constrained by Nigeria’s Long-Term IDRs of ‘B-‘, due to the bank’s high sovereign exposure relative to capital and the concentration of its operations in Nigeria.
Again, UBA’s National Long-Term Rating balances a strong franchise against higher leverage than higher-rated peers’.
Strong Local and Pan-African Franchise
The UK-based rating agency saidUBA has a pan-African franchise with subsidiaries in 20 countries outside of Nigeria. These contributed 46% of net income and 39% of assets at end-2022.
“We believe UBA’s ability to capitalise on business and trade flows and attract deposits across the continent is a competitive advantage relative to peers”, Fitch stated.
High Sovereign Exposure
Fitch again said the single-obligor credit concentration is moderate, with the 20-largest loans representing 113% of UBA’s Fitch Core Capital (FCC) at end-2022.
Oil and gas exposure (16% of gross loans at end-2022) is lower than peers’, adding, Nigerian sovereign exposure through securities and CBN cash reserves is high relative to FCC (over 350% at end-2022).
Challenging operating environment
Fitch pointed out that banks in Nigeria continue to contend with US dollar shortages and the Central Bank of Nigeria’s (CBN) highly burdensome cash reserve requirement.
It, therefore, expects reform progress under the new administration, including the elimination of fuel subsidies and gradual liberalisation of the naira.
“However, we see a risk of a sharp naira depreciation due to large disparities between the official and parallel exchange rates. The CBN has increased its policy rate by 700bp since April 2022 (currently 18.5%) due to rising inflation (22% in April 2023).
DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policies of Homebase Television Ltd.
- President Commissions 36.5 Million Dollars Hospital In The Tain District
- You Will Not Go Free For Killing An Hard Working MP – Akufo-Addo To MP’s Killer
- I Will Lead You To Victory – Ato Forson Assures NDC Supporters
Visit Our Social Media for More
About Author
